Philadelphia City Council Aims To Improve DROP

PHILADELPHIA (CBS) – After months of waiting, it looks like Philadelphia City Council will try to fix the controversial DROP retirement program rather than abolish it completely, as requested last year by Mayor Michael Nutter.

Council Majority Leader Marian Tasco introduced a bill Thursday morning that would amend the DROP program but keep it in place for the city’s workforce. Council members say their plan for DROP would remove most — but not all — of the program’s cost by adjusting the interest rate employees earn in the program and by requiring workers to stay on the job two years past their minimum retirement date before they can become eligible.

That would dramatically reduce the cost of the program, council members say, from about $10 million per year to about $1 million per year.

“Council’s plan significantly reduces the cost of DROP,” said Councilman Bill Green, one of the sponsors of the plan. He says several council members want to keep DROP in place to avoid lawsuits from the city’s unions — who believe DROP is a collectively-bargained right.

DROP, or Deferred Retirement Option Plan, pays city workers a lump sum pension payment when they retire, in exchange for that worker providing advance notice of retirement. When a worker enrolls in the program, their pension benefits are frozen, meaning they will collect lower yearly payments once they retire, but the city begins paying those benefits into an account with interest, generating the lump sum payout.

Watch the video…

The program was supposed to be cost-neutral and was intended to help the city manage its workforce, especially among skilled workers, but studies show it has cost the city’s pension fund between $100 million and $258 million since it was put in place a decade ago.

DROP caught the public’s attention after several city council members enrolled — amassing enormous lump sum payments. Several of the plan’s initial backers, including former mayor Ed Rendell, said the program was never intended for politicians.

Mayor Nutter called on council to abolish DROP last August in response to public outcry and a study that showed it was costing the city millions. Nutter repeated that demand again Thursday.

“It’s time for this program to go,” he told Eyewitness News. “Any cost at all is too much. The city still has fiscal challenges, and this is not a time to be adding expenses.”